Private vs. Public Blockchains: You Don’t Mean It When You Say “Blockchain, Not Bitcoin”
By Skylar on ALTCOIN MAGAZINE
The future of privacy and data integrity is on the line.
A common response I have come across when discussing public blockchain networks with friends and family is they believe in blockchain as a technology, but not in Bitcoin and cryptocurrencies. It’s a casual response that gives the feeling they have looked in to things, but simply aren’t impressed. All too frequently though, it is a cop-out. I mean no offense, but if you’ll indulge me for a moment, I’ll paint a clearer vision of what exactly that statement implies.
Why Blockchain?
The entire reason anyone is talking about the blockchain, or distributed ledger technology as a whole, is because it provides a transparent record of transactions on an immutable ledger that isn’t controlled from a central server.
Take away the decentralized network of computers facilitating the network’s activity, the immutability, or the transparency, and my friends, we’re looking at a really slow and expensive database where the data is no more secure than on existing centralized databases.
Context for Private Blockchains
Now, anyone pulling the “blockchain not bitcoin” card is probably citing Hyperledger and projects from IBM like TradeLens. Or maybe there is that cool example of Walmart tracing mangos back through their supply chain in seconds instead of days.
Those are undoubtedly interesting examples of private blockchain networks. Companies are setting up consortiums of industry leaders or simply launching their own network of nodes to support an immutable database. Considering the points above though, how can anyone verify this data if it isn’t being pushed to a public network at some point?
Let’s understand this through a similar scenario: most companies currently have an intranet for internal company documents, project management, etc. This network used to be on your company’s own servers, but now it is probably hosted in the cloud. This intranet is linked to your company website and/or other databases, plug-ins, resources, and so on. At certain points in the process, information gets pushed from your intranet to these other repositories and the way this information is sent is over a public network, the internet.
Giving Value to Private Blockchains
Private blockchains appear to have situations where they are good replacements for existing intranets because they add an additional layer of data security. The implications are massive — hackers need to gain access to a majority of the nodes (computers) facilitating transactions on the network — an infinitely more difficult task than hacking a centralized database on one server.
Now, the problem with the internet is that it can be censored. Additionally, after pushing its data to the internet, a company could still change its data internally (remember: they could control all the nodes on their own private blockchain) and rewrite history, then overwrite the previous information on their website. Or, the company could just take its website down.
Sure, it is fine for some websites to disappear, but let’s think of this in the context of publicly funded research.
Immutable Ledgers as an Enforcer of Democracy
As the Trump administration continues to manipulate and delete publicly funded climate change and environmental research from federal websites and databases, universities have been scrambling to back up critical information.
There is no safe record of this information that the people of the USA paid for with their own tax dollars.
The takeaway: simply having an internal private blockchain and pushing data to the internet isn’t useful unless we can trust the internet.
The New Internet
Public blockchain networks, a.k.a. cryptocurrencies, are the next generation of the internet. But why do we need digital money for this stuff? Why can’t we just have the blockchain be a more secure internet?
Companies clearly have an incentive to set up nodes (computers) to validate transactions on their private networks. They also have an incentive to ensure their information is accurate, to the degree it positively impacts their bottom line.
So how do you get anyone to offer up computing power and memory on their devices for a public decentralized immutable ledger? After all, we don’t want one corporation, or even a subset of corporations, to be in full control of re-writing the history of this public database. Once transactions are validated on the ledger, we should be able to trust the data is immutable. The only way to ensure this immutability is to ensure the network is decentralized — there must be enough participants so as to make it nearly impossible to re-write history.
Incentivizing a New Internet Infrastructure
Cryptocurrencies are an incentive mechanism for anyone, anywhere to participate in these networks. Bitcoin’s 11-year history has proven the public blockchain can work by rewarding the general public for making computing power available to the network. It works generally like this: the supply of Bitcoin increases at an automatic rate, with a maximum supply expected to be reached in the mid 2100s. Anyone anywhere can contribute their computer’s hashing power to the proof of work mining process.
Basically, when a transaction is submitted to the blockchain for processing, computers all around the world compete to validate this transaction by doing complex math requiring a significant amount of energy. The first computer to solve this block is rewarded with a newly minted Bitcoin. That “solved” block gets added to the blockchain and distributed across all of the other nodes, and the process continues.
Closing Thoughts
I’m personally not convinced the Bitcoin project has the capacity to function as the new internet given the energy waste and slow development over the past decade. It has mainly continued to function as a speculative store of value with nominal real-world functionality. Furthermore, almost every new proof of work network has run in to problems with getting enough hash power to thwart a 51% attack. A 51% attack in the form of a major divide in the community is what led to the Bitcoin and Bitcoin Cash fork in 2017.
That said, anyone saying “blockchain not bitcoin” is advocating a future dominated by a small handful of corporations with full insight into your private transactions and the ability to rewrite history as it suites them. This is already an issue — and it is the real problem blockchain was envisioned to protect against in the first place.
At the end of the day, we are still at such an early point in the industry — no one knows who has the winning tech offering. Proof of stake and other consensus mechanisms show great promise with their significant reduction in energy consumption. In the months and years to come, I expect a more versatile and well-designed public network to make itself more prominently known.
Until then, the race continues: which public blockchain will be the next internet?
